Update 1-16-12:

Goldman Sachs reviewing conflicts policies for M&A bankers according to the Wall Street Journal.

Original Post 1-15-12:

Occasionally, employees and former employees have the courage to speak the truth about what really takes place in their organizations.  The results are typically not pretty, but such honesty is essential to restoring trust and addressing endemic problems in an organization’s culture.  Given that our country is still dealing with the aftermath of the financial meltdown, we need much more honesty from people like Greg Smith.

Here’s what the Wall Street Journal wrote today:

Goldman Sachs Group Inc. GS +2.40% said it will examine claims by an employee who quit Wednesday that executives “callously” talk about “ripping their clients off” in order to make more money for the securities firm.

The pledge was part of a daylong scramble by the New York company to contain potential damage from the public attack. The employee, 33-year-old Greg Smith, wrote in the New York Times that he had decided to walk away from his 12-year career at Goldman because of the firm’s “toxic and destructive” culture—a 1,270-word denunciation that ricocheted around the world in sharply divided tweets, Facebook comments and blog posts.

At Goldman, the op-ed prompted anger toward Mr. Smith and new introspection among executives stung by persistent outside criticism of the company since the financial crisis began. Unlike previous incidents in which Goldman seemed to be caught flat-footed, company officials quickly launched a public-relations counteroffensive Wednesday that minimized Mr. Smith’s role at the firm.

In a memo to employees, Goldman Chairman and Chief Executive Lloyd C. Blankfein and President Gary D. Cohnwrote that Mr. Smith was one “of nearly 12,000 vice presidents” among more than 30,000 employees at the company.

This kind of news is only going to make it harder for Wall Street to recruit on college campuses, according to The New York Times‘s Dealbook.

By the way, here’s an excellent whjte paper about speaking truth to power, organizational culture, and organizational change by leadership guru Jim O’Toole.  It also contains a neat discussion of Sophocles’s Antigone, one of the original sources for the concept of speaking truth to power, as well.



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